Stock Market Forecast for Next 6 Months
The Dow, S&P, and NASDAQ are down again today and investors are distracted by inflation and rising energy prices, not to mention continued supply chain delays for the Xmas season. What does this say about the winter ahead? That there’s going to be buying opportunities in October and November!
What makes this 6 month stock market forecast any different than it was 3 months ago? It has to be the debt ceiling crisis US government shutdown coming in December.
A number of market economists warned of a correction in October. Others are calling for an everything rally, but they’re becoming sheepish about that call as the price of oil jumps to $80 on the oil markets. The rising oil price will increase inflation as fall and winter heating bills rise. The misery of oil and gas and coal is coming from China whose sudden erratic decisions are causing markets to wobble.
China’s burst in regulation exposes bad things in their economy. Evergrande, a real estate company is facing bankruptcy and major default, and this makes investors fear a ripple of bad news. China wants to punish Australia and clean up their air for the coming Olympics, by cutting the use of coal, although now they’re demanding Chinese producers produce 100 billion tons of it for China’s use.
Biden has remained silent on China’s splurge on the dreaded polluting coal. They’re using natural gas and oil instead and it’s adding to the surge in energy prices. Winter is just ahead and Goldman Sachs predicts a $90 barrel of oil by year end.
The disruption of unemployment benefits and the end of rent moratoriums are bound to hit many consumers. A small weight to the negative side. If the Democrats don’t get the debt ceiling raised, and the Republicans don’t take the bait on the “we’re in this together” gambit, they could have to own the debt threat by themselves. There is a belief the Republicans will sign off on the $3.5 stimulus and debt ceiling removal, but they say in interviews that they won’t.
Rising 10 year treasury yields and bond prices seem to be a worry for some investors. The bond market is looking better. See more on hedging strategies and how you can survive this slowdown.
Overall, we have some reopening strength, yet the recovery is being strung out longer. A big fear is for October November and December where volatility, government shutdowns, and investor fear could combine for an event. By spring 2022 however, we should be enjoying a significant improvement and the Dow Jones, S&P, and NASDAQ might even return to record highs. That makes the 6 month forecast cautious. You should be looking for buying opportunities, including Bitcoin. 2023 is where a concern of a downturn or crash looks stronger.
“Consumers have plenty of income and wealth ammunition to support consumer spending, while business inventories remain lean and restocking efforts are poised to support business investment and overall GDP growth substantially in the second half of the year,” — Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina – from Reuters report.
In general, Americans are awash in cash with low debt, and wages are rising. Of course, inflation seems to be eating into that growth, but we’ll see if inflation is a persistent threat to corporate profits. Most corporations simply pass on inflation and taxes to customers, and we’re entering a period of intense spending where consumer wants are the priority.
Some of the slowdown in goods spending reflects shortages of motor vehicles and other appliances, whose production has been hampered by tight supplies of semiconductors across the globe — from Reuters report.
Consumer sentiment might be low right now, but that temporary mood will dissipate. Americans will spend more on homes, iPhones, big screen TVS, vacations and more. If Covid 19 is tamed by December, the travel season might be a good one. The back to school spending will keep momentum as we enter the holiday season.
New data shows consumers are ready to spend, travel and take chances. Certainly investing in Bitcoin is an expression of optimism, and with a signing of a stimulus package, the economy is set for the roaring 20s. Let’s hope this happens. See the factors that will drive the next 6 months.
The economy likely grew at an 8.5% annualized rate last quarter — from Reuters recent report.
The Dow Jones, S&P 500 and NASDAQ have enjoyed steep growth curves year to date, although not like 2020 (growth is usually about 10% after a peak year) and more growth is certain for the next 6 months.
Whether tomorrow, next week, next month and into next year the stock market and housing market are poised to move ahead. Yes, new home construction is down and inflation is up, but the market will produce what consumers crave. Governments will make it harder with their crazy agendas, but what consumers want, they will get.
A report from Quantum Metric shows the holiday shopping season might be very good. They found that:
- Americans 56% more likely to see the holidays as important or meaningful
- Half (47 percent) plan to spend more on the 2021 season than pre-covid
- 62% plan to primarily shop online
Of course the current Covid 19 surge is that variable that could ruin the party for the unvaccinated. But for the rest, they’ll be buoyed by stats that show the vaccinated aren’t getting sick. That will raise the national mood and increase holiday spending. Rising commodities, materials costs is buoying the Dow Jones average and showing that manufacturers don’t want to miss out on the shopping bonanza.
And with inflation rising at a brisk pace, we can be relatively certain that housing prices will rise. Worries about inflation are being discussed still while others are talking about deflation at some point, yet these worries pale in comparison to the reopening economy.
The final growth of the stock market in 2022, really depends on a variety of political factors too. Joe Biden is talking higher taxes, control of monopolies, and a big stimulus plan. Nothing is written in stone, and stimulus talk has been quiet of late. There’s no doubt that stimulus news was driving stock prices and without it, during a quiet summer, you might expect a day or week of price falls.
Smart investors, business owners and home buyers all focus on the 6 month forecast and 5 year outlook as a more reliable guide. In a highly indebted economy based on credit (and big savings too), the Fed and its interest rate intentions are really important. The Fed says it will not raise rates in the next 6 months, so this bodes well for the last half of 2021 and the 2022 forecast.
As a reminder, the Christmas buying season is only about 3 to 4 months away, and forecasts are predicting strong Xmas sales. It’s American savings that are the key to the upcoming sales boom. As Covid is defeated, the opening to retail sales, travel, leisure and hospitality will fund a return to normal, and beyond.
Key 6 Month forecast factors:
- Powell, FOMC and the Fed: pushing short term inflation to support 2% inflation long term
- Fed is intending to taper its spending spree
- Inflation is considered good for growth, but short term inflation even if it hits 5% to 10% won’t cripple the long term growth trend
- GDP: strong first quarter growth at 6.4%, and Atlanta Fed forecasts a 9.3% rate for 2nd quarter
- Housing Market outlook: construction beginning to rise while prices begin to moderate
- 5 year outlook for the housing market positive given savings rate, demographics, and immigration forecasts
- post pandemic recovery pace easing but is still well above 2019 levels
- Wage Growth : employment rate steadied with slight rise in wages during April (s increased by 21 cents to $30.17)
Workers are reluctant to return to work for a number of reasons, but those reasons will diminish in the coming 6 months with vaccinations and fed payment wage subsidy program ending
- Biden’s stimulus package likely to provide $3 Trillion boost to the economy and could be sustained spending for many years.
- Corporate earnings reports positive heading into summer recovery and business reopening
- Consumer spending rose .5% in April
- travel spending surged in May
- shortages in products and materials likely to spur more investment
- The US Manufacturing PMI index rose to 62.1 in May of 2021 from 60.5 in April. There was a growth in expansion and new orders.
The ISM’s index of national factory activity increased to a reading of 61.2 last month from 60.7 in April. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy. Economists polled by Reuters had forecast the index rising to 60.9 in May. — Reuters’s report.
The Next 6 months is the hot topic as the Xmas season nears.
Do you believe the economic growth last? What will drive it.
Please do share this post generously!
Over the June to December forecast period, we’re going to see more stock market index records. The Dow, S&P, NASDAQ and Russell are poised to reach their respective records soon. Sure there’s debt based crash talk and volatility test investors convictions. Yet, the momentum is clear and any inflation that occurs might encourage more investment (bond market hates inflation).
Take a good look at the fastest gaining small, mid and large cap stocks with an eye on safety and hedging. Experts believe the market will cool, but they’ve been saying that for years, so you have to take their predictions and projections with a grain of salt. See more on the best tech stocks, 5G stocks, and oil stocks.
Covid 19 still influences the markets. Although the new Covid variants are threatening, the vaccinations are progressing fast in the US, so we’ll see the US economy open faster this summer. By fall, which will be within a historically amazing time for retail and industry, and profits and prices will continue very high. Earnings reports are solid. The key is to look for the best value stocks and maybe pass on Bitcoin (although USD isn’t a good investment).
Best Summer Stocks to Buy?
- Wayfair (NYSE:W) (retail furniture boom)
- McDonald’s (NYSE:MCD) (consumer spending, end of covid)
- Carvana (NYSE:CVNA) (used cars)
- Carnival Cruise Lines (NYSE:CCL) (travel and tourism prices rising fast)
- Vail Resorts (NYSE:MTN) (hotels opening up, recreation coming back)
- Visa (NYSE:V) (consumer spending on credit rising)
- Nvidia (NASDAQ:NVDA) (chips for phones, gameplaying, and cars)
The Market is Complicated but Overpowered by Growth
Few indicators suggest a stock market crash or a housing crash and financial collapse is imminent. The crash factors are complex. Complexity with extreme price growth means the threat will surprise everyone. Credit and the stimulus will take care of the next few years. Inflation will happen, but economists don’t believe it will be damaging to growth or profits through 2022.
Americans are worried about a housing market collapse, but with such low housing supply, it’s hard to see anything dropping home prices. Stimulus will grow construction even in a grossly over-regulated housing market. Home prices are surging out of hand this spring and summer. Bidding wars will abound and many homeowners will finally decide to sell to catch some of the windfall. It won’t be a problem after the next six months.
CBO Report: Positive for 5 Years
“Specifically, real (inflation-adjusted) gross domestic product (GDP) is projected to return to its prepandemic level in mid-2021 and to surpass its potential (that is, its maximum sustainable) level in early 2025. In CBO’s projections, the unemployment rate gradually declines through 2026, and the number of people employed returns to its prepandemic level in 2024.” — CBO Overview of the Economic Outlook: 2021 to 2031.
One expert says the euphoria is gone and it’s hard to get investors excited. Well, that just isn’t true. People are still depressed through the pandemic, and are only re-emerging in the spring of 2021. There will be plenty of crazy euphoria by late summer when Covid 19 infections dwindle.
Many of the bears are looking at issues that might not kill the economy for a few years. The Biden stimulus money will help bridge all problems in the next 6 months. One expert believes the stimulus money will actually reach the capital markets this time, where Trump’s stimulus money did not.
Clouding the 3 month and 6 month outlook however, is the aforementioned housing market where a tsunami of evictions and continuing plague of rent defaults threatens. There is a level of volatility, uncertainty and a departure from old statistical trends, that makes stock market outlooks seem sketchy.
Yet if you’re a stock market investor, potential stock investor, home buyer, or employer, you need to be keying in on the core of economic paths (cyclical stocks).
I forecasted a w shaped recovery 4 months ago, and the experts forecasted a V shaped recovery. What may be happening is a K shaped recovery as stimulus has lagged so badly. Yet as the recovery picks up steam, we could see unemployment drop fast as the remaining small businesses reopen. Those survivors will have their markets to themselves as marginal businesses have dropped out.
Standard Outlook: Recovery in 2021
But the economy could also crash. In fact, even the housing market with its low mortgage rates and vicious shortages of housing stock, and rising new home construction growth could come to a shuddering halt if the Democrats win this election and no vaccine appears.
conference board gdp forecast
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